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Wednesday, May 1, 2013

Frito-Lay Outlines ‘Extreme’ Shift in Marketing Approach

Doesn’t the world have enough chips?” asked Ann Mukherjee of Frito-Lay North America?

“Are we going to get consumers in the U.S. to buy and eat more? The answer is no,” said the senior vice president and chief marketing officer of the PepsiCo division that boasts a portfolio of mega-brands such as Lays, Doritos, Tostitos, and others.

But the executive, who has been dubbed the “Corn Queen,” sees potential for growth in the “tails” or extreme ends of the market where she is focused on capturing “pockets of demand.” Her methods are often unconventional and creative, but they represent Frito-Lay’s new marketing approach in what she calls the volatile world of today and tomorrow.

Mukherjee acknowledged the impressive scale of her $14 billion snack empire. But she questioned whether Frito-Lay should rethink what it is scaled to do.

“We make great products and make sure they are in every location,” she said recently in a keynote presentation at the IRI Summit in Las Vegas. “That’s how we built this business. The question we need to ask ourselves is: What do you build scale for in today’s age? How do you take scale and make it flexible? That sounds like two ambiguous thoughts, but it is at the intersection of that ambiguity where we will win.”

Mukherjee said today’s scale needs to be about understanding what consumers want and leveraging scale to deliver it better than anyone else. She stressed the need to look at the world and product categories through the “consumer’s lens” rather than the “manufacturer’s lens.” Consumer marketing will become obsolete. It will be replaced by consumer engagement using new technologies.

“Shopping is fundamentally changing,” she stated. “In this world, we need to understand how to work with it. I’m telling you, there’s a revolution coming in CPG.

“We all look at trends on how to be predictive, but in this day and age, it’s not about trends. It’s about disruption. Can you be predictive of those rifts? If you can’t and if you don’t innovate, you will die.”

Quoting Bob Johansen, a research fellow at the Institute for the Future, Mukherjee painted a challenging future for marketers: It will be a volatile, uncertain, complex and brutal world. All resources – whether people, environment, agriculture – will be stretched.

“But there is hope,” she said, “because the next decade will also be defined by new technologies and new ways of connecting. It’s about understanding how to get to better insights to leverage growth. The smartest people who come up with the smartest solutions will make that happen. And in those new solutions will come new demand. The question is:

Can you get out on front of it? Can you predict where the pockets of demand will come so you can take advantage of this new world?”

Mukherjee said Frito-Lay has identified eight pockets of demand, and she singled out one for illustration: Young and Hungry. She described this group of males aged 25 years and younger as “promiscuous snackers” who are loyal to nothing and are motivated by metabolism.

“They are hungry constantly,” she said. “These people will eat cardboard if it tastes good.”

But Frito-Lay figured out what their “demand moment” was. It created marketing, programming and innovation that excited the Young and Hungry for Doritos, which has been one of the marketer’s faster-growing brands.

One successful product involved a partnership between Taco Bell and Frito-Lay. The fast-service restaurant created Doritos Locos Tacos. This special taco consisted of premium seasoned beef, crisp lettuce, diced juicy red ripe tomatoes, real cheddar cheese, topped with cool reduced-fat sour cream, in a shell made from Nacho Cheese Doritos Chips. The demand by the Young and Hungry was so huge that it helped to create 15,000 jobs for the restaurant to serve customers.

“We understood that the true demand moment and one of the biggest places for demand was away from home,” she said. “In a world when anyone can get anything they want when they want it, you got to disrupt.”

She told of another disruption that involved Frito-Lay unveiling a 56-foot-tall vending machine last year at the South by Southwest Music Conference and Festival in Austin, Texas to debut Doritos Jacked Tortilla Chips. Several pop artists performed on The Jacked Stage by Doritos inside the vending machine, which doubled as a concert venue and dispenser of product samples and prizes to music festival-goers.

“We knew that advertising to the Young and Hungry had to be fundamentally different,” she said. “We needed a strategy that created context that was so cool. We telecasted it globally.”

For more traditional marketing, Mukherjee stressed the importance of transferring demand across different channels.

“We create partnerships and deliver a demand-based solution depending upon the channel,” she said. “So what we do in a Costco versus in a Kroger is driven by demand and how it is expressed in that channel. We also know that all these moments are not created equal. That’s because in today’s world we don’t live in a melting pot; we live in a mosaic.”

She called for collaborating with trading partners to find solutions. “We have to disrupt together. We must learn as fast as the world is changing around us. Only then, will we be transformed.”